Leading quote:

“The headwinds facing markets seem great: trade wars, political uncertainty and the Fed determined to tighten monetary policy. On the other hand the underlying economic growth is positive, profits are up and investors have cash to invest” — Paul Brain, Head of Fixed Income at Newton Investment Management.

“During the relatively quiet summer weeks, risk assets can grind up but the withdrawal of dollar liquidity is now the prevalent trend. Commodities and Asian currencies are the headline assets at risk during this phase.”

Hot topic:

China’s currency fell to a fresh one-year low against the dollar on Friday, even after comments from President Donald Trump knocked the dollar from wider year-highs.

The pace for the renminbi is being set by softer economic growth and trade tension with the US, while Mr Trump’s statement that he was “not thrilled” by the Federal Reserve’s interest rate rises took momentum from the dollar. The index tracking it fell 0.5 per cent from a year-high over the previous session and is a further 0.2 per cent weaker on Friday.

The onshore renminbi — which trades in a 2 per cent band either side of the daily midpoint set by the country’s central bank — is 0.3 per cent weaker at Rmb6.7912 having touched Rmb6.8106, its weakest since June 2017. The offshore renminbi, which is not subject to the trading band, eased 0.4 per cent to Rmb6.178, having fallen to Rmb6.8365 earlier in the session, also its weakest since June 2017. Its decline on Thursday was its biggest single-session fall since February.

The current bout of renminbi weakness has not yet been accompanied by the global market panic experienced in late 2015 and early 2016 . . . Whether or not China is wittingly undertaking a depreciation policy, the question will increasingly be on investors’ minds as the slide deepens.

As long as the renminbi is falling in an orderly manner, there is little urgency for the Chinese authorities to counter it

Forex and fixed income:

The yen is 0.1 per cent stronger at ¥112.32, while the pound is trading at $1.3022, hovering at a 10-month low. The euro is 0.1 per cent weaker at $1.1651.

The yield on the 10-year US Treasury was 1 basis point higher at 2.845 per cent.

Equities:

Frankfurt’s Xetra Dax 30 is down 0.2 per cent, as is the Europe-wide Stoxx 600. London’s FTSE 100 is bucking the trend, up 0.1 per cent, helped by the weaker pound.

Japan’s Topix was down 0.5 per cent as technology stocks shed 0.6 per cent and financials shed 0.8 per cent.

In Hong Kong, the Hang Seng index fell 0.5 per cent to a 10-month low. In mainland China, the CSI 300 comprised of Shanghai and Shenzhen fell 0.4 per cent.

Australia’s S&P/ASX 200 was up 0.3 per cent, as all sectors other than basic materials gained.

Overnight on Wall Street, the S&P 500 ended 0.4 per cent down, its first decline in three sessions and the Nasdaq Composite shed 0.4 per cent.

Commodities:

Oil prices were rose following comments from Saudi Arabia’s Opec governor that crude exports would fall by around 100,000 barrels a day in August compared to July. Brent crude was down 0.1 per cent higher at $72.64 a barrel and West Texas Intermediate, the US benchmark, was up 0.2 per cent at $69.60 a barrel.